Lifestyling changes the investment mix over time
A lifestyle pension strategy usually starts with more growth-focused investments when retirement is far away, then gradually moves towards lower-risk assets as retirement gets closer.
The idea is simple. Younger pension investors may have time to recover from market falls. Someone close to retirement may have less time, so a large fall can be more damaging.
Lifestyling can be useful because it automates part of the risk reduction process. It can help people who do not want to make frequent investment decisions themselves.
But it is not perfect for everyone. The right strategy depends on how you plan to take benefits, whether you will draw down, buy an annuity, keep investing or use other income sources.
Questions to ask
- When does the strategy start reducing risk?
- What does it move into near retirement?
- Does it match how you plan to access your pension?
- Could it become too cautious too early?
- Should it be reviewed before retirement?